Black Sea Watch: Grains shipments halve following turbulent week

Grains and fertilizer exports through the three Ukrainian ports covered by the UN-brokered safe passage Black Sea Grain Initiative reached 10,067,175 mt as of Nov. 7 since the deal inception, but have almost halved over the week ended Nov. 5 to sink to their lowest weekly levels since early September.

The return of the Russian Federation delegation Nov. 3 has eased the worst fears of an abrupt termination of the deal following Russia's previous suspension of participation Oct. 29. The increased risk of sailing the Black Sea during the critical reentry negotiations took its toll on volumes shipped during the week, with inspectors from the UN and Turkey having had to perform duties only as a "temporary and extraordinary measure."

Seaborne grain flows during the week of Oct. 31-Nov. 6 from the Black Sea under the UN-brokered safe passage agreement fell to 545,530 mt, marking a 46% drop on the week to the lowest levels of weekly seaborne exports since early September, according to data from the Black Sea Grain Initiative's Joint Coordination Centre.

In detail, 242,643 mt of corn were transported under the deal, amounting to over 44% of the total weekly grain flows, with another 123,200 mt wheat exported during the same period, accounting for almost 23% of the flows. The rest of the cargoes consisted of sunflower meal and sunflower oil, as well as other grain types.

The average weekly cargo size has continued its steady increase since the recent trough in mid-October to reach fresh highs of almost 34,096 mt per shipment during the week. This was a 22% rise on the week and surpassed by 3,389 mt the previous average cargo size record observed during the first week of the deal.

The largest cargo observed during the week was a 66,750 mt shipment of corn from Chornomorsk, carried onboard the 2012 built, 82,099 dwt Key Knight destined for China.

In terms of destinations, Europe and Central Asia accounted for about 41% of the shipments during the week of Oct. 31-Nov. 6, with a similar portion heading to east Asia and the Pacific. Just below 18% of the grains were destined for the Middle East and North Africa, according to the JCC, with China emerging as the top expected destination, drawing 225,219 mt during the week.

Almost 57% of the grains shipments are expected to end up in upper-middle income destinations, and an additional 41% could reach high-income countries, with a bit over 2% for the lower-middle income destinations, JCC data showed. Russia has already complained about the fact that most of the flows are not destined for those countries most vulnerable to food insecurity.

Global food prices in October reached their lowest level since the Russia-Ukraine war began in February, according to the UN's Food and Agriculture Organization.

Markets focus on Nov 19 expiry

Looking ahead, Russia's return to the deal would support grains flows for the Nov. 7-13 week, potentially contributing to a recovery in cargo traffic with insurers having already restarted issuing quotes for shipments.

According to the JCC, seven inbound ships transited the maritime humanitarian corridor heading toward Ukrainian ports Nov. 5-6, with only two ships under the initiative still moored at Ukrainian ports as of late Nov. 6.

In addition, there were 88 ships waiting to move into Ukrainian ports and another 18 loaded ships in anticipation of inspection in Turkish territorial waters, with four joint teams planned to continue the inspections Nov. 7.

The current 120-day period for which the safe-passage deal has been agreed will end Nov. 19, with the Black Sea Grain Initiative set for an automatic renewal in the case of an absence of notifications of intentions of termination or modification from either Ukraine, the Russian Federation or Turkey.

Still, concerns of a potential termination persist following Russia's recent suspension of participation and consecutive return, with market participants stressing that the deal needs to be renewed as there is no other way of ensuring sufficient grains exports from the region.

Ukraine grains export stand to benefit from an extension of the deal duration to a one-year agreement, which would allow for a more detailed planning of the next harvest. A potential modification scenario was also supported by talks that Russia might attempt to negotiate a relaxation of sanctions imposed by Europe, the US and allies on key entities facilitating its grain exports.

In the freight markets, S&P Global previously reported participants' concerns about lower levels of flows through the Black Sea that cannot yet provide support to dry bulk rates. The Platts KMAX 9 Index, a weighted average of time charter equivalent rates on key Kamsarmax routes assessed by Platts, last stood at $13,738/d Nov. 4, averaging closer to $21,046/d for 2022 year-to-date, and almost 21% below the 2021 full-year average, S&P Global data showed.